A proxy advisory firm has asked shareholders of United Spirits to reject the adoption of accounts during Tuesday’s (November 24) annual general meeting.

In its report, the proxy advisory firm Shareholders’ Empowerment Services (SES) has raised issues of what it calls impropriety and opaqueness on the part of the board.

The AGM is being seen as extremely crucial as its chairman Vijay Mallya has been asked to step down by the board on charges of financial irregularities. He, however, has said that he will not do so and will chair the AGM.

SES said the Auditors Report is full of qualifications. “To use the phrase it is full of red ink. While the Board in Directors Report has given its comments, SES is of the opinion that full details are still not in public domain (shareholders knowledge). It has been over six months when things came out in public domain and there is no update.”

“Given a choice, it, as a shareholder, would vote against the resolution to adopt accounts. SES would, however, ask shareholders to take their own decision based on their own understanding,” the report said.

SES has raised the issue about whether Mallya chaired the meeting when the board discussed the matter of him being asked to resign due to financial impropriety. “Is it a case that post the allegation and asking Mallya to resign, he is not attending the meetings of the Board? Or is it a case that he is chairing the meeting and allowing the discussions,” the report said.

It said going by the attendance record of Mallya in board meetings held in 2014-15, where he attended 12 out of 13 board meetings, it is unlikely that he was not attending the meetings.

It further said the notice for AGM is dated September 23, 2015, the Directors Report is dated September 23, 2015 and Auditors Report is dated May 27, 2015.

This gives rise to two interpretations: First, that Mallya has been kept in dark and is not aware what the Board is doing. If that be the case, it is a violation of board procedure, law and cannot be called a good governance practice. The other interpretation is that Mallya was aware of the board proceeding and factually it was not known on September 28, 2015, when the AGM will be held.

In that case the notice and annual report is predated. If that be the case it is not only a violation of law but also a poor governance practice. It should be investigated by the Regulator when the Annual Report was despatched to the shareholders.

SES also said that request made by the company for extension of time for holding the AGM was rejected by the Registrar of Companies and this was a serious non-compliance issue.

“Rejection of request for extension of time to hold AGM is not a common event and has lots of governance related issue. The company as a good governance measure should have communicated to shareholders immediately after the rejection.”

Also, Mallya continues to be part of the board’s nomination and remuneration committee, risk management committee, CSR committee and stakeholders’ relationship committees.

While it may not be within the powers of the board to remove him as chairman, the Board could have removed him from the committees.

The advisory firm suggested that the shareholders should seek update and ask USL to initiate criminal actions against those responsible for wrongdoings.

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